Tokyo-based Rakuten started off in 1997 as an online marketplace but has since sprawled in Amazon-like fashion, moving successfully into fields like travel, payment and banking. But when its chief executive Mickey Mikitani told his CEO friends that he planned to take Rakuten into the telecom industry, they warned him we would fail.
The business is brutally competitive, Mikitani’s friends told him, and requires vast amounts of capital. Nonetheless, Rakuten believes it’s found a way to overcome these formidable obstacles.
Speaking at Fortune‘s digital Brainstorm Finance conference, Mikitani explained that gaining a foothold in the phone and telecom market requires three huge upfront costs: capital infrastructure, spectrum and customer acquisition.
Rakuten, however, has been able to enter the market with less than half of the capital investment that is typically required, Mikitani said. It has managed to pull this off by using software rather hardware to build out many aspects of its network. Meanwhile, it has been able to acquire a large number of customers by leveraging its existing business strategy, which touts Rakuten as a membership company rather than as simply an ecommerce forum.
Mikitani added that anticipates Rakuten will be able to further decrease its costs by “virtualizing, automating and using AI here and there.”
If its telecom gambit succeeds, Rakuten will have conquered another difficult industry after already becoming Japan’s biggest player in the fields of fintech and credit cards.
“Let’s go hardcore in the mobile space where the lifetime value of the customer is big,” said Mikitani, explaining why Rakuten set its eyes on telecom in the first place.
Mikitani also addressed doing business during the pandemic, saying that Rakuten has been able to navigate the unprecedented challenge thanks to its diverse business that provide a valuable counterbalance.
“If we have a typhoon, our travel and outdoor sports business is in bad shape, but our internet shopping goes up,” he noted.